Keurig's newest coffee machine has failed to take off
The company cut its outlook for the year on Wednesday after reporting second-quarter profit and revenue that missed Wall Street's expectations.
Keurig blamed the performance on lackluster interest in its new machine, called the Keurig 2.0.
"Our top-line growth... was below our expectations primarily due to the slower than expected transition to the Keurig 2.0 system," Keurig President and CEO Brian Kelley said in a release. "We are taking actions to reduce brewer inventories, enhance our 2.0 brewer packaging to better communicate our extensive brand variety and step up innovation on our owned brands."
Keurig's second-quarter profit declined 4% to $155.5 million, or 97 cents a share, compared to a year ago. On an adjusted basis, the company earned $1.03 per share, which fell short of the $1.05 analysts had expected. Revenue increased 2% to $1.13 billion, missing expectations of $1.15 billion.
The new machine was expected to be a top-selling item last holiday season. But it ended up alienating some customers because it will only function with pods licensed by Keurig.
Keurig 2.0 launched in August and within a couple months, it had already racked up hundreds of scathing online reviews from unhappy customers.
"This machine is a total waste of money and I will not be a party to lining Keurig's greedy pockets by keeping it," one customer wrote on Amazon. "I've been happy with Keurig in the past, but this model is going back and I will find another manufacturer to purchase from."
Unlike Keurig's single-serve machine, Keurig 2.0 can make up to 30 ounces of coffee at once using a K-Cup that's about twice the size of its traditional coffee pods. The machine can also brew a single cup of coffee.
Many customers are upset that unlike other Keurig brewers, the new machine doesn't accept all K-Cups. A box of eight carafe-size Keurig K-Cups costs about $15.
"If you don't mind zip-tying your hands behind your back when browsing your grocery store for K-Cups, then the 2.0 is for you," one reviewer wrote. "Feel like supporting Keurig's tactical attempt to increase the price of these little coffee pods? Or maybe you just need Keurig to lighten your wallet every week? Enjoy your new and unimproved brewer that does less for more of your money."
Others complained that the machine doesn't work well.
"Heats up slowly. Brews slowly. Doesn't make good coffee," wrote on reviewer. "This new system has effectively undone all the great benefits of the old machines."
Out of 1,429 Amazon reviews, nearly half gave the machine a 1-star rating. Overall, the machine's average rating is 2.7 stars out of 5 stars.
Keurig Green Mountain put a lot of stock in the success of its new machine.
"Retailers are very excited about the launch of Keurig 2.0, and have been very supportive by highlighting the product with advertising, promotion, and merchandising, as we move through the holiday season," Keurig CEO Brian Kelley said during an earnings call in November.
The brewer is "by far the largest and most significant product launch we've ever accomplished," he said.
Two years ago, the company launched another machine that made larger servings called The Vue, and it never caught on.
The Keurig 2.0 has some customizable options that allow users to adjust the temperature and strength of each batch of coffee. The machine also remembers preferences with the touch of a "favorite" button and it still has the capacity to brew smaller batches using regular-sized K-Cups.